Proposed Collection; Comment Request, 3668-3671 [2015-01076]
Download as PDF
<![CDATA[
3668
Federal Register / Vol. 80, No. 15 / Friday, January 23, 2015 / Notices
The Commission requests written
comments on: (a) Whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to Pamela Dyson, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Remi
Pavlik-Simon, 100 F Street NE.,
Washington, DC 20549; or send an email
to: PRA_Mailbox@sec.gov.
Dated: January 16, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015–01074 Filed 1–22–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA
Services, 100 F Street NE.,
Washington, DC 20549–2736.
tkelley on DSK3SPTVN1PROD with NOTICES
Extension:
Rule 12d1–1; SEC File No. 270–526, OMB
Control No. 3235–0584.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
An investment company (‘‘fund’’) is
generally limited in the amount of
securities the fund (‘‘acquiring fund’’)
can acquire from another fund
(‘‘acquired fund’’). Section 12(d) of the
Investment Company Act of 1940 (the
‘‘Investment Company Act’’ or ‘‘Act’’) 1
1 See
15 U.S.C. 80a.
VerDate Sep<11>2014
18:05 Jan 22, 2015
Jkt 235001
provides that a registered fund (and
companies it controls) cannot:
• Acquire more than three percent of
another fund’s securities;
• invest more than five percent of its
own assets in another fund; or
• invest more than ten percent of its
own assets in other funds in the
aggregate.2
In addition, a registered open-end
fund, its principal underwriter, and any
registered broker or dealer cannot sell
that fund’s shares to another fund if, as
a result:
• The acquiring fund (and any
companies it controls) owns more than
three percent of the acquired fund’s
stock; or
• all acquiring funds (and companies
they control) in the aggregate own more
than ten percent of the acquired fund’s
stock.3
Rule 12d1–1 under the Act provides
an exemption from these limitations for
‘‘cash sweep’’ arrangements in which a
fund invests all or a portion of its
available cash in a money market fund
rather than directly in short-term
instruments.4 An acquiring fund relying
on the exemption may not pay a sales
load, distribution fee, or service fee on
acquired fund shares, or if it does, the
acquiring fund’s investment adviser
must waive a sufficient amount of its
advisory fee to offset the cost of the
loads or distribution fees.5 The acquired
fund may be a fund in the same fund
complex or in a different fund complex.
In addition to providing an exemption
from section 12(d)(1) of the Act, the rule
provides exemptions from section 17(a)
of the Act and rule 17d–1 thereunder,
which restrict a fund’s ability to enter
into transactions and joint arrangements
with affiliated persons.6 These
provisions would otherwise prohibit an
acquiring fund from investing in a
money market fund in the same fund
complex,7 and prohibit a fund that
2 See 15 U.S.C. 80a–12(d)(1)(A). If an acquiring
fund is not registered, these limitations apply only
with respect to the acquiring fund’s acquisition of
registered funds.
3 See 15 U.S.C. 80a–12(d)(1)(B).
4 See 17 CFR 270.12d1–1.
5 See rule 12d1–1(b)(1).
6 See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d); 17
CFR 270.17d–1.
7 An affiliated person of a fund includes any
person directly or indirectly controlling, controlled
by, or under common control with such other
person. See 15 U.S.C. 80a–2(a)(3) (definition of
‘‘affiliated person’’). Most funds today are organized
by an investment adviser that advises or provides
administrative services to other funds in the same
complex. Funds in a fund complex are generally
under common control of an investment adviser or
other person exercising a controlling influence over
the management or policies of the funds. See 15
U.S.C. 80a–2(a)(9) (definition of ‘‘control’’). Not all
advisers control funds they advise. The
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
acquires five percent or more of the
securities of a money market fund in
another fund complex from making any
additional investments in the money
market fund.8
The rule also permits a registered
fund to rely on the exemption to invest
in an unregistered money market fund
that limits its investments to those in
which a registered money market fund
may invest under rule 2a–7 under the
Act, and undertakes to comply with all
the other provisions of rule 2a–7.9 In
addition, the acquiring fund must
reasonably believe that the unregistered
money market fund (i) operates in
compliance with rule 2a–7, (ii) complies
with sections 17(a), (d), (e), 18, and
22(e) of the Act 10 as if it were a
registered open-end fund, (iii) has
adopted procedures designed to ensure
that it complies with these statutory
provisions, (iv) maintains the records
required by rules 31a–1(b)(1), 31a–
1(b)(2)(ii), 31a–1(b)(2)(iv), and 31a–
1(b)(9); 11 and (v) preserves
permanently, the first two years in an
easily accessible place, all books and
records required to be made under these
rules.
Rule 2a–7 contains certain collection
of information requirements. An
unregistered money market fund that
complies with rule 2a–7 would be
subject to these collection of
information requirements. In addition,
the recordkeeping requirements under
rule 31a–1 with which the acquiring
fund reasonably believes the
unregistered money market fund
complies are collections of information
for the unregistered money market fund.
The adoption of procedures by
unregistered money market funds to
ensure that they comply with sections
17(a), (d), (e), 18, and 22(e) of the Act
also constitute collections of
information. By allowing funds to invest
in registered and unregistered money
market funds, rule 12d1–1 is intended
to provide funds greater options for cash
management. In order for a registered
fund to rely on the exemption to invest
determination of whether a fund is under the
control of its adviser, officers, or directors depends
on all the relevant facts and circumstances. See
Investment Company Mergers, Investment
Company Act Release No. 25259 (Nov. 8, 2001) [66
FR 57602 (Nov. 15, 2001)], at n.11. To the extent
that an acquiring fund in a fund complex is under
common control with a money market fund in the
same complex, the funds would rely on the rule’s
exemptions from section 17(a) and rule 17d–1.
8 See 15 U.S.C. 80a–2(a)(3)(A), (B).
9 See 17 CFR 270.2a–7.
10 See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d),
15 U.S.C. 80a–17(e), 15 U.S.C. 80a–18, 15 U.S.C.
80a–22(e).
11 See 17 CFR 270.31a–1(b)(1), 17 CFR 270.31a–
1(b)(2)(ii), 17 CFR 270.31a–1(b)(2)(iv), 17 CFR
270.31a–1(b)(9).
E:\FR\FM\23JAN1.SGM
23JAN1
Federal Register / Vol. 80, No. 15 / Friday, January 23, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
in an unregistered money market fund,
the unregistered money market fund
must comply with certain collection of
information requirements for registered
money market funds. These
requirements are intended to ensure that
the unregistered money market fund has
established procedures for collecting the
information necessary to make adequate
credit reviews of securities in its
portfolio, as well as other recordkeeping
requirements that will assist the
acquiring fund in overseeing the
unregistered money market fund (and
Commission staff in its examination of
the unregistered money market fund’s
adviser).
The number of unregistered money
market funds that are affected by rule
12d1–1 is an estimate based on the
number of private liquidity funds
reported on Form PF as of May 7,
2014.12 The hour burden estimates for
the condition that an unregistered
money market fund comply with rule
2a–7 are based on the burden hours
included in the Commission’s 2013 PRA
submission regarding rule 2a–7.13 The
estimated average burden hours in this
collection of information are made
solely for purposes of the Paperwork
12 See U.S. Securities and Exchange Commission
Annual Staff Report Relating to the Use of Data
Collected from Private Fund Systemic Risk Reports,
Appendix A, Census PF Data as of May 7, 2014,
available at https://www.sec.gov/reportspubs/
special-studies/im-private-fund-annual-report081514.pdf. In the past, the staff has estimated the
number of affected unregistered money market
funds based on the latest number of exemptive
applications received by the Commission that
sought relief for registered funds to purchase shares
in an unregistered money market fund in excess of
the section 12(d)(1) limits. The staff’s prior estimate
of 30 affected unregistered money market funds was
based on 40 exemptive applications received by the
Commission in 2005 (the last full year in which the
Commission received applications seeking an
exemption to invest in unregistered money market
funds in excess of the statutory limits) and adjusted
by the percentage change in registered money
market funds from 2005 to November 2011 (870
funds to 641 funds, according to the Investment
Company Institute). The staff noted that this
estimate may be understated because applicants
generally did not identify the name or number of
unregistered money market funds in which
registered funds intended to invest, and each
application also applies to unregistered money
market funds to be organized in the future.
13 See Securities and Exchange Commission,
Request for OMB Approval of Extension for
Approved Collection for Rule 2a–7 under the
Investment Company Act of 1940 (OMB Control No.
3235–0268) (approved Aug. 28, 2013). In
connection with amendments to rule 2a–7 adopted
in July 2014, the Commission also submitted a
Revision of a Currently Approved Collection for
Rule 2a–7, which is not yet approved. See Money
Market Fund Reform, Investment Company Act
Release No. 31166 (July 23, 2014) [79 FR 47736
(Aug. 14, 2014)], available at https://www.sec.gov/
rules/final/2014/33-9616.pdf; Securities and
Exchange Commission, Revision of a Currently
Approved Collection (OMB Control No. 3235–0268)
(pending, submitted September 4, 2014).
VerDate Sep<11>2014
18:05 Jan 22, 2015
Jkt 235001
Reduction Act and are not derived from
a quantitative, comprehensive or even
representative survey or study of the
burdens associated with Commission
rules and forms.
In the most recent rule 2a–7
submission, Commission staff made the
following estimates with respect to
aggregate annual hour and cost burdens
for collections of information for each
existing registered money market fund:
Record of credit risk analyses, and
determinations regarding adjustable rate
securities, asset backed securities,
securities subject to a demand feature or
guarantee, and counterparties to
repurchase agreements:
85 responses
680 hours of professional time
Cost: $178,160 14
Public Web site posting of monthly
portfolio information:
12 responses
7 hours of professional time
Cost: $17,304 15
Review of procedures and guidelines
of any investment adviser to whom the
fund’s board has delegated
responsibility under rule 2a–7 and
amendment of such procedures:
1 response
5 hours of professional and director
time
Cost: $5,960 16
Based on new census data available
on Form PF, the staff now believes that
the number of private liquidity funds
reported on Form PF (69) is a more
current and accurate estimate the
number of unregistered money market
funds affected by rule 12d1–1.17 Each of
these unregistered money market funds
engages in the collections of information
described above. Accordingly, the staff
estimates that unregistered money
market funds complying with the
collections of information described
14 This estimate is based on the following
calculation: (680 burden hours × $262 per hour for
professional time) = $178,160 per fund.
15 This estimate is based on the following
calculation: (12 × 7 burden hours × $206 per hour
for a webmaster) = $17,304 per fund.
16 This estimate is based on the following
calculation: (1 hour × $4,500 per hour for board
time) + (4 hours × $365 per hour for professional
time) = $5,960 per fund.
17 See supra note 12. The staff notes, however,
that this estimate may be overstated to the extent
that a private liquidity fund reported on Form PF
does not follow all of rule 2a-7’s requirements (that
include collections of information) or because no
registered investment companies invest in such a
fund. The staff also notes, however, that this
estimate may be understated to the extent that there
are additional unregistered money market funds
that are not required to be reported on Form PF
(because Form PF is filed only by certain
investments advisers to private funds that have
$150 million in private fund assets under
management).
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
3669
above engage in a total of 6,762 annual
responses under rule 12d1–1,18 the
aggregate annual burden hours
associated with these responses is
47,748,19 and the aggregate annual cost
to funds is $13,898,256.20
In the rule 2a–7 submissions,
Commission staff further estimated the
aggregate annual hour and cost burdens
for collections of information for fund
complexes with registered money
market funds as follows:
Review, revise, and approve
procedures concerning stress testing:
1 response
12 burden hours of professional and
director time
Cost: $8,021 21
Report to fund boards on the results
of stress testing:
5 responses
10 burden hours of professional and
support staff time
Cost: $15,490 22
Reporting of rule 17a–9
transactions: 23
1 response
1 burden hour of legal time
Cost: $378 24
Based on the number of large liquidity
fund advisers reported on Form PF, the
staff estimates that there are 25 fund
complexes with unregistered money
market funds invested in by mutual
18 The estimate is based on the following
calculations: (69 funds × 85 responses for
documentation of credit analyses and other
determinations) = 5,865 responses. (69 funds × 12
responses for public Web site posting) = 828
responses. (69 funds × 1 response for policies and
procedures related to delegation to an investment
adviser) = 69 responses. 5,865 responses + 828
responses + 69 responses = 6,762 responses.
19 This estimate is based on the following
calculations: (69 funds × 680 hours for
documentation of credit analyses and other
determinations) = 46,920 hours. (69 funds × 7 hours
for public Web site posting) = 483 hours. (69 funds
× 5 hours for policies and procedures related to
delegation to an investment adviser) = 345 hours.
46,920 hours + 483 hours + 345 hours = 47,748
hours.
20 This estimate is based on the following
calculations: (69 funds × $178,160) = $12,293,040.
(69 funds × $17,304) = $1,193,976. (69 funds ×
$5,960) = $411,240. $12,293,040 + $1,193,976 +
$411,240 = $13,898,256.
21 This estimate is based on the following
calculation: (1 hour × $4,500 per hour for board
time) + (5 hours × $322 per hour for a portfolio
manager) + (3 hours × $259 per hour for a risk
management specialist) + (3 hours × $378 per hour
for an attorney) = $8,021 per response.
22 This estimate is based on the following
calculation: (5 responses × 5 hours × $322 per hour
for a portfolio manager) + (5 responses × 2 hours
× $279 per hour for a compliance manager) + (5
responses × 2 hours × $378 per hour for an attorney)
+ (5 responses × 1 hour × $174 per hour for support
staff) = $15,490 per fund complex.
23 See 17 CFR 270.17a–9.
24 The estimate is based on the following
calculations: (1 response × $378 per hour for an
attorney) = $378 per response.
E:\FR\FM\23JAN1.SGM
23JAN1
3670
Federal Register / Vol. 80, No. 15 / Friday, January 23, 2015 / Notices
funds in excess of the statutory limits
under rule 12d1–1.25 Each of these fund
complexes engages in the collections of
information described above.
Accordingly, the staff estimates that
these fund complexes complying with
the collections of information described
above engage in a total of 175 annual
responses under rule 12d1–1,26 the
aggregate annual burden hours
associated with these responses is 575,27
and the aggregate annual cost to funds
is $597,225.28
In the rule 2a–7 submissions,
Commission staff further estimated the
aggregate annual burdens for registered
money market funds that experience an
event of default or insolvency as
follows:
Written record of board
determinations and actions related to
failure of a security to meet certain
eligibility standards or an event of
default of default or insolvency:
2 responses
1 burden hour of legal time
Cost: $378
Notice to Commission of an event of
default or insolvency:
1 response
0.5 burden hours of legal time
Cost: $189
Consistent with the estimate in the
rule 2a–7 submissions, Commission
staff estimates that approximately 2
percent, or 1, unregistered money
market fund experiences an event of
default or insolvency each year.
Accordingly, the staff estimates that one
unregistered money market fund will
comply with these collection of
information requirements and engage in
3 annual responses under rule 12d1–1,29
the aggregate annual burden hours
25 See
supra note 12.
estimate is based on the following
calculations: (25 fund complexes × 1 response for
revision of procedures concerning stress testing) =
25 responses. (25 fund complexes × 5 responses to
provide stress testing reports) = 125 responses. (25
fund complexes × 1 response for reporting of rule
17a–9 transactions) = 25 responses. 25 responses +
125 responses + 25 responses = 175 responses.
27 This estimate is based on the following
calculations: (25 fund complexes × 12 hours for
revision of procedures concerning stress testing) =
300 hours. (25 fund complexes × 10 hours to
provide stress testing reports) = 250 hours. (25 fund
complexes × 1 hour for reporting of rule 17a–9
transactions) = 25 hours. 300 hours + 250 hours +
25 hours = 575 hours.
28 This estimate is based on the following
calculations: (25 fund complexes × $8,021 for
revision of procedures concerning stress testing) =
$200,525. (25 fund complexes × $15,490 to provide
stress testing reports) = $387,250. (25 fund
complexes × $378 for reporting of rule 17a–9
transactions) = $9,450. $200,525 + $387,250 +
$9,450 = $597,225.
29 The estimate is based on the following
calculations: (1 fund × 2 responses) + (1 fund × 1
response) = 3 responses.
tkelley on DSK3SPTVN1PROD with NOTICES
26 The
VerDate Sep<11>2014
18:05 Jan 22, 2015
Jkt 235001
associated with these responses is 1.5,30
and the aggregate annual cost to funds
is $567.31
In the rule 2a–7 submissions,
Commission staff further estimated the
aggregate annual burdens for newly
registered money market funds as
follows:
Establish written procedures and
guidelines designed to stabilize the
fund’s net asset value and establish
procedures for board delegation of
authority:
1 response
15.5 hours of director, legal, and
support staff time
Cost: $6,328 32
Adopt procedures concerning stress
testing:
1 response per fund complex
22 burden hours of professional and
director time per fund complex
Cost: $19,373 per fund complex 33
Commission staff estimates that the
proportion of unregistered money
market funds that intend to newly
undertake the collection of information
burdens of rule 2a–7 will be similar to
the proportion of money market funds
that are newly registered. Based on a
projection of 10 new money market
funds per year (in the most recent rule
2a–7 submission), the staff estimates
that, similarly, there will be 10 new
unregistered money market funds that
undertake the above burden to establish
written procedures and guidelines
designed to stabilize the fund’s net asset
value and establish procedures for board
delegation of authority.34 Accordingly,
the staff estimates that 10 unregistered
money market funds will comply with
this collection of information
requirement and engage in 10 annual
30 This estimate is based on the following
calculations: (1 fund × 1 hour) + (1 fund × 0.5
hours) = 1.5 hours.
31 This estimate is based on the following
calculations: (1 fund × $378) + (1 fund × $189) =
$567.
32 This estimate is based on the following
calculation: (0.5 hours × $4,500 per hour for board
time) + (7.2 hours × $378 per hour for an attorney)
+ (7.8 hours × $174 per hour for support staff) =
$6,328 per response.
33 This estimate is based on the following
calculation: (3 hours × $4,500 per hour for board
time) + (8 hours × $378 per hour for an attorney)
+ (11 hours × $259 per hour for a risk management
specialist) = $19,373 per response. See also infra
note 34.
34 The staff’s estimate is based on historical data
provided in Lipper Inc.’s LANA database and
projections about the growth of the money market
mutual fund industry going forward. The actual
number of new money market funds launched may
vary significantly from our estimates depending
upon developments in market interest rates and
reactions to recent amendments adopted to money
market funds in July 2014. The staff does not
estimate any new fund complexes being launched
in the next year.
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
responses under rule 12d1–1,35 the
aggregate annual burden hours
associated with these responses is 155,36
and the aggregate annual cost to funds
is $62,380.37
Accordingly, the estimated total
number of annual responses under rule
12d1–1 for the collections of
information described in the rule 2a–7
submissions is 6,950, the aggregate
annual burden hours associated with
these responses is 48,479.5, and the
aggregate cost to funds is $14,558,428.38
Rules 31a–1(b)(1), 31a–1(b)(2)(ii),
31a–1(b)(2)(iv), and 31a–1(b)(9) require
registered funds to keep certain records,
which include journals and general and
auxiliary ledgers, including ledgers for
each portfolio security and each
shareholder of record of the fund. Most
of the records required to be maintained
by the rule are the type that generally
would be maintained as a matter of good
business practice and to prepare the
unregistered money market fund’s
financial statements. Accordingly,
Commission staff estimates that the
requirements under rules 31a–1(b)(1),
31a–1(b)(2)(ii), 31a–1(b)(2)(iv), and 31a–
1(b)(9) would not impose any additional
burden because the costs of maintaining
these records would be incurred by
unregistered money market funds in any
case to keep books and records that are
necessary to prepare financial
statements for shareholders, to prepare
the fund’s annual income tax returns,
and as a normal business custom.
Rule 12d1–1 also requires
unregistered money market funds in
which registered funds invest to adopt
procedures designed to ensure that the
unregistered money market funds
comply with sections 17(a), (d), (e), and
22(e) of the Act. This is a one-time
collection of information requirement
that applies to unregistered money
market funds that intend to comply with
the requirements of rule 12d1–1. As
discussed above, based on a projection
of 10 new money market funds per year,
the staff estimates that, similarly, there
will be 10 new unregistered money
market funds that undertake the above
burden to establish written procedures
and guidelines designed to ensure that
the unregistered money market funds
comply with sections 17(a), (d), (e), and
35 The estimate is based on the following
calculations: (10 funds × 1 response) = 10
responses.
36 This estimate is based on the following
calculations: (10 funds × 15.5 hours) = 155 hours.
37 This estimate is based on the following
calculations: (10 funds × $6,238) = $62,380.
38 These estimates are based upon the following
calculations: (6,762 + 175 + 3+ 10) = 6,950 annual
responses; (47,748 + 575 + 1.5 + 155) = 48,479.5
burden hours; and ($13,898,256 + $597,225 + $567
+ $62,380) = $14,558,428.
E:\FR\FM\23JAN1.SGM
23JAN1
Federal Register / Vol. 80, No. 15 / Friday, January 23, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
22(e) of the Act. The staff estimates the
burden as follows:
Establish written procedures and
guidelines designed to ensure that the
unregistered money market funds
comply with sections 17(a), (d), (e), and
22(e) of the Act:
1 response
15.5 hours of director, legal, and
support staff time
Cost: $6,328 39
Accordingly, the staff estimates that
10 unregistered money market funds
will comply with this collection of
information requirement and engage in
10 annual responses under rule 12d1–
1,40 the aggregate annual burden hours
associated with these responses is 155,41
and the aggregate annual cost to funds
is $62,380.42
Commission staff also estimates that
unregistered money market funds will
incur costs to preserve records, as
required under rule 2a–7. These costs
will vary significantly for individual
funds, depending on the amount of
assets under fund management and
whether the fund preserves its records
in a storage facility in hard copy or has
developed and maintains a computer
system to create and preserve
compliance records. In the rule 2a–7
submissions, Commission staff
estimated that the amount an individual
money market fund may spend ranges
from $100 per year to $300,000. We
have no reason to believe the range is
different for unregistered money market
funds. Based on Form PF data as of May
7, 2014, private liquidity funds have
$257 billion in regulatory assets under
management.43 The Commission does
not have specific information about the
proportion of assets held in small,
medium-sized, or large unregistered
money market funds. Because private
liquidity funds are often used as cash
management vehicles, the staff estimates
that each private liquidity fund is a
‘‘large’’ fund (i.e., more than $1 billion
in assets under management). Based on
a cost of $0.0000009 per dollar of assets
under management (for large funds),44
39 This estimate is based on the following
calculation: (0.5 hours × $4,500 per hour for board
time) + (7.2 hours × $378 per hour for an attorney)
+ (7.8 hours × $174 per hour for support staff) =
$6,328 per response.
40 The estimate is based on the following
calculations: (10 funds × 1 response) = 10
responses.
41 This estimate is based on the following
calculations: (10 funds × 15.5 hours) = 155 hours.
42 This estimate is based on the following
calculations: (10 funds × $6,238) = $62,380.
43 See supra note 12.
44 The recordkeeping cost estimates are
$0.0051295 per dollar of assets under management
for small funds, and $0.0005041 per dollar of assets
under management for medium-sized funds. The
VerDate Sep<11>2014
18:05 Jan 22, 2015
Jkt 235001
the staff estimates compliance with rule
2–7 for these unregistered money
market funds totals $231,300
annually.45
Consistent with estimates made in the
rule 2a–7 submissions, Commission
staff estimates that unregistered money
market funds also incur capital costs to
create computer programs for
maintaining and preserving compliance
records for rule 2a–7 of $0.0000132 per
dollar of assets under management.
Based on the assets under management
figures described above, staff estimates
annual capital costs for all unregistered
money market funds of $3.39 million.46
Commission staff further estimates that,
even absent the requirements of rule 2a–
7, money market funds would spend at
least half of the amounts described
above for record preservation ($115,650)
and for capital costs ($1.7 million).
Commission staff concludes that the
aggregate annual costs of compliance
with the rule are $115,650 for record
preservation and $1.7 million for capital
costs.
The collections of information
required for unregistered money market
funds by rule 12d1–1 are necessary in
order for acquiring funds to be able to
obtain the benefits described above.
Notices to the Commission will not be
kept confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to Pamela Dyson, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Remi
cost estimates are the same as those used in the
most recently approved rule 2a–7 submission.
45 This estimate is based on the following
calculation: ($257 billion × $0.0000009) = $231,300
billion for small funds.
46 This estimate is based on the following
calculation: ($257 billion × 0.0000132) = $3.39
million.
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
3671
Pavlik-Simon, 100 F Street NE.,
Washington, DC 20549; or send an email
to: PRA_Mailbox@sec.gov.
Dated: January 16, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015–01076 Filed 1–22–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension:
Rule 206(3)–2; SEC File No. 270–216, OMB
Control No. 3235–0243.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 206(3)–2, (17 CFR 275.206(3)–2)
which is entitled ‘‘Agency Cross
Transactions for Advisory Clients,’’
permits investment advisers to comply
with section 206(3) of the Investment
Advisers Act of 1940 (the ‘‘Act’’) (15
U.S.C. 80b–6(3)) by obtaining a client’s
blanket consent to enter into agency
cross transactions (i.e., a transaction in
which an adviser acts as a broker to both
the advisory client and the opposite
party to the transaction), provided that
certain disclosures are made to the
client. Rule 206(3)–2 applies to all
registered investment advisers. In
relying on the rule, investment advisers
must provide certain disclosures to their
clients. Advisory clients can use the
disclosures to monitor agency cross
transactions that affect their advisory
account. The Commission also uses the
information required by Rule 206(3)–2
in connection with its investment
adviser inspection program to ensure
that advisers are in compliance with the
rule. Without the information collected
under the rule, advisory clients would
not have information necessary for
monitoring their adviser’s handling of
their accounts and the Commission
would be less efficient and effective in
its inspection program.
E:\FR\FM\23JAN1.SGM
23JAN1
]]>Agencies
[Federal Register Volume 80, Number 15 (Friday, January 23, 2015)]
[Notices]
[Pages 3668-3671]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01076]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Proposed Collection; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736.
Extension:
Rule 12d1-1; SEC File No. 270-526, OMB Control No. 3235-0584..
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (the ``Commission'') is soliciting comments on the
collection of information summarized below. The Commission plans to
submit this existing collection of information to the Office of
Management and Budget for extension and approval.
An investment company (``fund'') is generally limited in the amount
of securities the fund (``acquiring fund'') can acquire from another
fund (``acquired fund''). Section 12(d) of the Investment Company Act
of 1940 (the ``Investment Company Act'' or ``Act'') \1\ provides that a
registered fund (and companies it controls) cannot:
---------------------------------------------------------------------------
\1\ See 15 U.S.C. 80a.
---------------------------------------------------------------------------
Acquire more than three percent of another fund's
securities;
invest more than five percent of its own assets in another
fund; or
invest more than ten percent of its own assets in other
funds in the aggregate.\2\
---------------------------------------------------------------------------
\2\ See 15 U.S.C. 80a-12(d)(1)(A). If an acquiring fund is not
registered, these limitations apply only with respect to the
acquiring fund's acquisition of registered funds.
---------------------------------------------------------------------------
In addition, a registered open-end fund, its principal underwriter,
and any registered broker or dealer cannot sell that fund's shares to
another fund if, as a result:
The acquiring fund (and any companies it controls) owns
more than three percent of the acquired fund's stock; or
all acquiring funds (and companies they control) in the
aggregate own more than ten percent of the acquired fund's stock.\3\
---------------------------------------------------------------------------
\3\ See 15 U.S.C. 80a-12(d)(1)(B).
---------------------------------------------------------------------------
Rule 12d1-1 under the Act provides an exemption from these
limitations for ``cash sweep'' arrangements in which a fund invests all
or a portion of its available cash in a money market fund rather than
directly in short-term instruments.\4\ An acquiring fund relying on the
exemption may not pay a sales load, distribution fee, or service fee on
acquired fund shares, or if it does, the acquiring fund's investment
adviser must waive a sufficient amount of its advisory fee to offset
the cost of the loads or distribution fees.\5\ The acquired fund may be
a fund in the same fund complex or in a different fund complex. In
addition to providing an exemption from section 12(d)(1) of the Act,
the rule provides exemptions from section 17(a) of the Act and rule
17d-1 thereunder, which restrict a fund's ability to enter into
transactions and joint arrangements with affiliated persons.\6\ These
provisions would otherwise prohibit an acquiring fund from investing in
a money market fund in the same fund complex,\7\ and prohibit a fund
that acquires five percent or more of the securities of a money market
fund in another fund complex from making any additional investments in
the money market fund.\8\
---------------------------------------------------------------------------
\4\ See 17 CFR 270.12d1-1.
\5\ See rule 12d1-1(b)(1).
\6\ See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d); 17 CFR
270.17d-1.
\7\ An affiliated person of a fund includes any person directly
or indirectly controlling, controlled by, or under common control
with such other person. See 15 U.S.C. 80a-2(a)(3) (definition of
``affiliated person''). Most funds today are organized by an
investment adviser that advises or provides administrative services
to other funds in the same complex. Funds in a fund complex are
generally under common control of an investment adviser or other
person exercising a controlling influence over the management or
policies of the funds. See 15 U.S.C. 80a-2(a)(9) (definition of
``control''). Not all advisers control funds they advise. The
determination of whether a fund is under the control of its adviser,
officers, or directors depends on all the relevant facts and
circumstances. See Investment Company Mergers, Investment Company
Act Release No. 25259 (Nov. 8, 2001) [66 FR 57602 (Nov. 15, 2001)],
at n.11. To the extent that an acquiring fund in a fund complex is
under common control with a money market fund in the same complex,
the funds would rely on the rule's exemptions from section 17(a) and
rule 17d-1.
\8\ See 15 U.S.C. 80a-2(a)(3)(A), (B).
---------------------------------------------------------------------------
The rule also permits a registered fund to rely on the exemption to
invest in an unregistered money market fund that limits its investments
to those in which a registered money market fund may invest under rule
2a-7 under the Act, and undertakes to comply with all the other
provisions of rule 2a-7.\9\ In addition, the acquiring fund must
reasonably believe that the unregistered money market fund (i) operates
in compliance with rule 2a-7, (ii) complies with sections 17(a), (d),
(e), 18, and 22(e) of the Act \10\ as if it were a registered open-end
fund, (iii) has adopted procedures designed to ensure that it complies
with these statutory provisions, (iv) maintains the records required by
rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9);
\11\ and (v) preserves permanently, the first two years in an easily
accessible place, all books and records required to be made under these
rules.
---------------------------------------------------------------------------
\9\ See 17 CFR 270.2a-7.
\10\ See 15 U.S.C. 80a-17(a), 15 U.S.C. 80a-17(d), 15 U.S.C.
80a-17(e), 15 U.S.C. 80a-18, 15 U.S.C. 80a-22(e).
\11\ See 17 CFR 270.31a-1(b)(1), 17 CFR 270.31a-1(b)(2)(ii), 17
CFR 270.31a-1(b)(2)(iv), 17 CFR 270.31a-1(b)(9).
---------------------------------------------------------------------------
Rule 2a-7 contains certain collection of information requirements.
An unregistered money market fund that complies with rule 2a-7 would be
subject to these collection of information requirements. In addition,
the recordkeeping requirements under rule 31a-1 with which the
acquiring fund reasonably believes the unregistered money market fund
complies are collections of information for the unregistered money
market fund. The adoption of procedures by unregistered money market
funds to ensure that they comply with sections 17(a), (d), (e), 18, and
22(e) of the Act also constitute collections of information. By
allowing funds to invest in registered and unregistered money market
funds, rule 12d1-1 is intended to provide funds greater options for
cash management. In order for a registered fund to rely on the
exemption to invest
[[Page 3669]]
in an unregistered money market fund, the unregistered money market
fund must comply with certain collection of information requirements
for registered money market funds. These requirements are intended to
ensure that the unregistered money market fund has established
procedures for collecting the information necessary to make adequate
credit reviews of securities in its portfolio, as well as other
recordkeeping requirements that will assist the acquiring fund in
overseeing the unregistered money market fund (and Commission staff in
its examination of the unregistered money market fund's adviser).
The number of unregistered money market funds that are affected by
rule 12d1-1 is an estimate based on the number of private liquidity
funds reported on Form PF as of May 7, 2014.\12\ The hour burden
estimates for the condition that an unregistered money market fund
comply with rule 2a-7 are based on the burden hours included in the
Commission's 2013 PRA submission regarding rule 2a-7.\13\ The estimated
average burden hours in this collection of information are made solely
for purposes of the Paperwork Reduction Act and are not derived from a
quantitative, comprehensive or even representative survey or study of
the burdens associated with Commission rules and forms.
---------------------------------------------------------------------------
\12\ See U.S. Securities and Exchange Commission Annual Staff
Report Relating to the Use of Data Collected from Private Fund
Systemic Risk Reports, Appendix A, Census PF Data as of May 7, 2014,
available at https://www.sec.gov/reportspubs/special-studies/im-private-fund-annual-report-081514.pdf. In the past, the staff has
estimated the number of affected unregistered money market funds
based on the latest number of exemptive applications received by the
Commission that sought relief for registered funds to purchase
shares in an unregistered money market fund in excess of the section
12(d)(1) limits. The staff's prior estimate of 30 affected
unregistered money market funds was based on 40 exemptive
applications received by the Commission in 2005 (the last full year
in which the Commission received applications seeking an exemption
to invest in unregistered money market funds in excess of the
statutory limits) and adjusted by the percentage change in
registered money market funds from 2005 to November 2011 (870 funds
to 641 funds, according to the Investment Company Institute). The
staff noted that this estimate may be understated because applicants
generally did not identify the name or number of unregistered money
market funds in which registered funds intended to invest, and each
application also applies to unregistered money market funds to be
organized in the future.
\13\ See Securities and Exchange Commission, Request for OMB
Approval of Extension for Approved Collection for Rule 2a-7 under
the Investment Company Act of 1940 (OMB Control No. 3235-0268)
(approved Aug. 28, 2013). In connection with amendments to rule 2a-7
adopted in July 2014, the Commission also submitted a Revision of a
Currently Approved Collection for Rule 2a-7, which is not yet
approved. See Money Market Fund Reform, Investment Company Act
Release No. 31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)],
available at https://www.sec.gov/rules/final/2014/33-9616.pdf;
Securities and Exchange Commission, Revision of a Currently Approved
Collection (OMB Control No. 3235-0268) (pending, submitted September
4, 2014).
---------------------------------------------------------------------------
In the most recent rule 2a-7 submission, Commission staff made the
following estimates with respect to aggregate annual hour and cost
burdens for collections of information for each existing registered
money market fund:
Record of credit risk analyses, and determinations regarding
adjustable rate securities, asset backed securities, securities subject
to a demand feature or guarantee, and counterparties to repurchase
agreements:
85 responses
680 hours of professional time
Cost: $178,160 \14\
\14\ This estimate is based on the following calculation: (680
burden hours x $262 per hour for professional time) = $178,160 per
fund.
---------------------------------------------------------------------------
Public Web site posting of monthly portfolio information:
12 responses
7 hours of professional time
Cost: $17,304 \15\
---------------------------------------------------------------------------
\15\ This estimate is based on the following calculation: (12 x
7 burden hours x $206 per hour for a webmaster) = $17,304 per fund.
---------------------------------------------------------------------------
Review of procedures and guidelines of any investment adviser to
whom the fund's board has delegated responsibility under rule 2a-7 and
amendment of such procedures:
1 response
5 hours of professional and director time
Cost: $5,960 \16\
\16\ This estimate is based on the following calculation: (1
hour x $4,500 per hour for board time) + (4 hours x $365 per hour
for professional time) = $5,960 per fund.
---------------------------------------------------------------------------
Based on new census data available on Form PF, the staff now
believes that the number of private liquidity funds reported on Form PF
(69) is a more current and accurate estimate the number of unregistered
money market funds affected by rule 12d1-1.\17\ Each of these
unregistered money market funds engages in the collections of
information described above. Accordingly, the staff estimates that
unregistered money market funds complying with the collections of
information described above engage in a total of 6,762 annual responses
under rule 12d1-1,\18\ the aggregate annual burden hours associated
with these responses is 47,748,\19\ and the aggregate annual cost to
funds is $13,898,256.\20\
---------------------------------------------------------------------------
\17\ See supra note 12. The staff notes, however, that this
estimate may be overstated to the extent that a private liquidity
fund reported on Form PF does not follow all of rule 2a-7's
requirements (that include collections of information) or because no
registered investment companies invest in such a fund. The staff
also notes, however, that this estimate may be understated to the
extent that there are additional unregistered money market funds
that are not required to be reported on Form PF (because Form PF is
filed only by certain investments advisers to private funds that
have $150 million in private fund assets under management).
\18\ The estimate is based on the following calculations: (69
funds x 85 responses for documentation of credit analyses and other
determinations) = 5,865 responses. (69 funds x 12 responses for
public Web site posting) = 828 responses. (69 funds x 1 response for
policies and procedures related to delegation to an investment
adviser) = 69 responses. 5,865 responses + 828 responses + 69
responses = 6,762 responses.
\19\ This estimate is based on the following calculations: (69
funds x 680 hours for documentation of credit analyses and other
determinations) = 46,920 hours. (69 funds x 7 hours for public Web
site posting) = 483 hours. (69 funds x 5 hours for policies and
procedures related to delegation to an investment adviser) = 345
hours. 46,920 hours + 483 hours + 345 hours = 47,748 hours.
\20\ This estimate is based on the following calculations: (69
funds x $178,160) = $12,293,040. (69 funds x $17,304) = $1,193,976.
(69 funds x $5,960) = $411,240. $12,293,040 + $1,193,976 + $411,240
= $13,898,256.
---------------------------------------------------------------------------
In the rule 2a-7 submissions, Commission staff further estimated
the aggregate annual hour and cost burdens for collections of
information for fund complexes with registered money market funds as
follows:
Review, revise, and approve procedures concerning stress testing:
1 response
12 burden hours of professional and director time
Cost: $8,021 \21\
\21\ This estimate is based on the following calculation: (1
hour x $4,500 per hour for board time) + (5 hours x $322 per hour
for a portfolio manager) + (3 hours x $259 per hour for a risk
management specialist) + (3 hours x $378 per hour for an attorney) =
$8,021 per response.
---------------------------------------------------------------------------
Report to fund boards on the results of stress testing:
5 responses
10 burden hours of professional and support staff time
Cost: $15,490 \22\
\22\ This estimate is based on the following calculation: (5
responses x 5 hours x $322 per hour for a portfolio manager) + (5
responses x 2 hours x $279 per hour for a compliance manager) + (5
responses x 2 hours x $378 per hour for an attorney) + (5 responses
x 1 hour x $174 per hour for support staff) = $15,490 per fund
complex.
---------------------------------------------------------------------------
Reporting of rule 17a-9 transactions: \23\
---------------------------------------------------------------------------
\23\ See 17 CFR 270.17a-9.
1 response
1 burden hour of legal time
Cost: $378 \24\
\24\ The estimate is based on the following calculations: (1
response x $378 per hour for an attorney) = $378 per response.
---------------------------------------------------------------------------
Based on the number of large liquidity fund advisers reported on
Form PF, the staff estimates that there are 25 fund complexes with
unregistered money market funds invested in by mutual
[[Page 3670]]
funds in excess of the statutory limits under rule 12d1-1.\25\ Each of
these fund complexes engages in the collections of information
described above. Accordingly, the staff estimates that these fund
complexes complying with the collections of information described above
engage in a total of 175 annual responses under rule 12d1-1,\26\ the
aggregate annual burden hours associated with these responses is
575,\27\ and the aggregate annual cost to funds is $597,225.\28\
---------------------------------------------------------------------------
\25\ See supra note 12.
\26\ The estimate is based on the following calculations: (25
fund complexes x 1 response for revision of procedures concerning
stress testing) = 25 responses. (25 fund complexes x 5 responses to
provide stress testing reports) = 125 responses. (25 fund complexes
x 1 response for reporting of rule 17a-9 transactions) = 25
responses. 25 responses + 125 responses + 25 responses = 175
responses.
\27\ This estimate is based on the following calculations: (25
fund complexes x 12 hours for revision of procedures concerning
stress testing) = 300 hours. (25 fund complexes x 10 hours to
provide stress testing reports) = 250 hours. (25 fund complexes x 1
hour for reporting of rule 17a-9 transactions) = 25 hours. 300 hours
+ 250 hours + 25 hours = 575 hours.
\28\ This estimate is based on the following calculations: (25
fund complexes x $8,021 for revision of procedures concerning stress
testing) = $200,525. (25 fund complexes x $15,490 to provide stress
testing reports) = $387,250. (25 fund complexes x $378 for reporting
of rule 17a-9 transactions) = $9,450. $200,525 + $387,250 + $9,450 =
$597,225.
---------------------------------------------------------------------------
In the rule 2a-7 submissions, Commission staff further estimated
the aggregate annual burdens for registered money market funds that
experience an event of default or insolvency as follows:
Written record of board determinations and actions related to
failure of a security to meet certain eligibility standards or an event
of default of default or insolvency:
2 responses
1 burden hour of legal time
Cost: $378
Notice to Commission of an event of default or insolvency:
1 response
0.5 burden hours of legal time
Cost: $189
Consistent with the estimate in the rule 2a-7 submissions,
Commission staff estimates that approximately 2 percent, or 1,
unregistered money market fund experiences an event of default or
insolvency each year. Accordingly, the staff estimates that one
unregistered money market fund will comply with these collection of
information requirements and engage in 3 annual responses under rule
12d1-1,\29\ the aggregate annual burden hours associated with these
responses is 1.5,\30\ and the aggregate annual cost to funds is
$567.\31\
---------------------------------------------------------------------------
\29\ The estimate is based on the following calculations: (1
fund x 2 responses) + (1 fund x 1 response) = 3 responses.
\30\ This estimate is based on the following calculations: (1
fund x 1 hour) + (1 fund x 0.5 hours) = 1.5 hours.
\31\ This estimate is based on the following calculations: (1
fund x $378) + (1 fund x $189) = $567.
---------------------------------------------------------------------------
In the rule 2a-7 submissions, Commission staff further estimated
the aggregate annual burdens for newly registered money market funds as
follows:
Establish written procedures and guidelines designed to stabilize
the fund's net asset value and establish procedures for board
delegation of authority:
1 response
15.5 hours of director, legal, and support staff time
Cost: $6,328 \32\
\32\ This estimate is based on the following calculation: (0.5
hours x $4,500 per hour for board time) + (7.2 hours x $378 per hour
for an attorney) + (7.8 hours x $174 per hour for support staff) =
$6,328 per response.
---------------------------------------------------------------------------
Adopt procedures concerning stress testing:
1 response per fund complex
22 burden hours of professional and director time per fund complex
Cost: $19,373 per fund complex \33\
\33\ This estimate is based on the following calculation: (3
hours x $4,500 per hour for board time) + (8 hours x $378 per hour
for an attorney) + (11 hours x $259 per hour for a risk management
specialist) = $19,373 per response. See also infra note 34.
---------------------------------------------------------------------------
Commission staff estimates that the proportion of unregistered
money market funds that intend to newly undertake the collection of
information burdens of rule 2a-7 will be similar to the proportion of
money market funds that are newly registered. Based on a projection of
10 new money market funds per year (in the most recent rule 2a-7
submission), the staff estimates that, similarly, there will be 10 new
unregistered money market funds that undertake the above burden to
establish written procedures and guidelines designed to stabilize the
fund's net asset value and establish procedures for board delegation of
authority.\34\ Accordingly, the staff estimates that 10 unregistered
money market funds will comply with this collection of information
requirement and engage in 10 annual responses under rule 12d1-1,\35\
the aggregate annual burden hours associated with these responses is
155,\36\ and the aggregate annual cost to funds is $62,380.\37\
---------------------------------------------------------------------------
\34\ The staff's estimate is based on historical data provided
in Lipper Inc.'s LANA database and projections about the growth of
the money market mutual fund industry going forward. The actual
number of new money market funds launched may vary significantly
from our estimates depending upon developments in market interest
rates and reactions to recent amendments adopted to money market
funds in July 2014. The staff does not estimate any new fund
complexes being launched in the next year.
\35\ The estimate is based on the following calculations: (10
funds x 1 response) = 10 responses.
\36\ This estimate is based on the following calculations: (10
funds x 15.5 hours) = 155 hours.
\37\ This estimate is based on the following calculations: (10
funds x $6,238) = $62,380.
---------------------------------------------------------------------------
Accordingly, the estimated total number of annual responses under
rule 12d1-1 for the collections of information described in the rule
2a-7 submissions is 6,950, the aggregate annual burden hours associated
with these responses is 48,479.5, and the aggregate cost to funds is
$14,558,428.\38\
---------------------------------------------------------------------------
\38\ These estimates are based upon the following calculations:
(6,762 + 175 + 3+ 10) = 6,950 annual responses; (47,748 + 575 + 1.5
+ 155) = 48,479.5 burden hours; and ($13,898,256 + $597,225 + $567 +
$62,380) = $14,558,428.
---------------------------------------------------------------------------
Rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-
1(b)(9) require registered funds to keep certain records, which include
journals and general and auxiliary ledgers, including ledgers for each
portfolio security and each shareholder of record of the fund. Most of
the records required to be maintained by the rule are the type that
generally would be maintained as a matter of good business practice and
to prepare the unregistered money market fund's financial statements.
Accordingly, Commission staff estimates that the requirements under
rules 31a-1(b)(1), 31a-1(b)(2)(ii), 31a-1(b)(2)(iv), and 31a-1(b)(9)
would not impose any additional burden because the costs of maintaining
these records would be incurred by unregistered money market funds in
any case to keep books and records that are necessary to prepare
financial statements for shareholders, to prepare the fund's annual
income tax returns, and as a normal business custom.
Rule 12d1-1 also requires unregistered money market funds in which
registered funds invest to adopt procedures designed to ensure that the
unregistered money market funds comply with sections 17(a), (d), (e),
and 22(e) of the Act. This is a one-time collection of information
requirement that applies to unregistered money market funds that intend
to comply with the requirements of rule 12d1-1. As discussed above,
based on a projection of 10 new money market funds per year, the staff
estimates that, similarly, there will be 10 new unregistered money
market funds that undertake the above burden to establish written
procedures and guidelines designed to ensure that the unregistered
money market funds comply with sections 17(a), (d), (e), and
[[Page 3671]]
22(e) of the Act. The staff estimates the burden as follows:
Establish written procedures and guidelines designed to ensure that
the unregistered money market funds comply with sections 17(a), (d),
(e), and 22(e) of the Act:
1 response
15.5 hours of director, legal, and support staff time
Cost: $6,328 \39\
\39\ This estimate is based on the following calculation: (0.5
hours x $4,500 per hour for board time) + (7.2 hours x $378 per hour
for an attorney) + (7.8 hours x $174 per hour for support staff) =
$6,328 per response.
---------------------------------------------------------------------------
Accordingly, the staff estimates that 10 unregistered money market
funds will comply with this collection of information requirement and
engage in 10 annual responses under rule 12d1-1,\40\ the aggregate
annual burden hours associated with these responses is 155,\41\ and the
aggregate annual cost to funds is $62,380.\42\
---------------------------------------------------------------------------
\40\ The estimate is based on the following calculations: (10
funds x 1 response) = 10 responses.
\41\ This estimate is based on the following calculations: (10
funds x 15.5 hours) = 155 hours.
\42\ This estimate is based on the following calculations: (10
funds x $6,238) = $62,380.
---------------------------------------------------------------------------
Commission staff also estimates that unregistered money market
funds will incur costs to preserve records, as required under rule 2a-
7. These costs will vary significantly for individual funds, depending
on the amount of assets under fund management and whether the fund
preserves its records in a storage facility in hard copy or has
developed and maintains a computer system to create and preserve
compliance records. In the rule 2a-7 submissions, Commission staff
estimated that the amount an individual money market fund may spend
ranges from $100 per year to $300,000. We have no reason to believe the
range is different for unregistered money market funds. Based on Form
PF data as of May 7, 2014, private liquidity funds have $257 billion in
regulatory assets under management.\43\ The Commission does not have
specific information about the proportion of assets held in small,
medium-sized, or large unregistered money market funds. Because private
liquidity funds are often used as cash management vehicles, the staff
estimates that each private liquidity fund is a ``large'' fund (i.e.,
more than $1 billion in assets under management). Based on a cost of
$0.0000009 per dollar of assets under management (for large funds),\44\
the staff estimates compliance with rule 2-7 for these unregistered
money market funds totals $231,300 annually.\45\
---------------------------------------------------------------------------
\43\ See supra note 12.
\44\ The recordkeeping cost estimates are $0.0051295 per dollar
of assets under management for small funds, and $0.0005041 per
dollar of assets under management for medium-sized funds. The cost
estimates are the same as those used in the most recently approved
rule 2a-7 submission.
\45\ This estimate is based on the following calculation: ($257
billion x $0.0000009) = $231,300 billion for small funds.
---------------------------------------------------------------------------
Consistent with estimates made in the rule 2a-7 submissions,
Commission staff estimates that unregistered money market funds also
incur capital costs to create computer programs for maintaining and
preserving compliance records for rule 2a-7 of $0.0000132 per dollar of
assets under management. Based on the assets under management figures
described above, staff estimates annual capital costs for all
unregistered money market funds of $3.39 million.\46\ Commission staff
further estimates that, even absent the requirements of rule 2a-7,
money market funds would spend at least half of the amounts described
above for record preservation ($115,650) and for capital costs ($1.7
million). Commission staff concludes that the aggregate annual costs of
compliance with the rule are $115,650 for record preservation and $1.7
million for capital costs.
---------------------------------------------------------------------------
\46\ This estimate is based on the following calculation: ($257
billion x 0.0000132) = $3.39 million.
---------------------------------------------------------------------------
The collections of information required for unregistered money
market funds by rule 12d1-1 are necessary in order for acquiring funds
to be able to obtain the benefits described above. Notices to the
Commission will not be kept confidential. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid control number.
Written comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the collection of information; (c) ways to enhance the
quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted in writing within 60
days of this publication.
Please direct your written comments to Pamela Dyson, Acting
Director/Chief Information Officer, Securities and Exchange Commission,
C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send
an email to: PRA_Mailbox@sec.gov.
Dated: January 16, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-01076 Filed 1-22-15; 8:45 am]
BILLING CODE 8011-01-P
